New World Is Making Bid to Swap Bonds : Ailing Firm Agrees to Sell Lions Gate Studio

New World Entertainment, acknowledging the burden of $31 million in annual interest payments on its “junk bonds,” said Friday that it has begun an effort to swap new debt issues in exchange for about $262 million in bonds currently outstanding.

The Los Angeles company also disclosed in a circular to its bondholders that it has reached an agreement to sell its Lions Gate Studios for $5 million, and it recently paid $10 million to Michael Landon Productions to bow out of a previously negotiated distribution agreement for the television series “Highway to Heaven,” which could have cost New World about $35.8 million this year.

New World, which had been aggressively expanding until the October market crash, said it hopes that the bond exchange will provide an opportunity to refinance its long-term debt and reduce its interest expense by redeeming bonds at 50 cents on the dollar. The bonds recently have traded at about one-third of their face value, company officials noted privately.

At $31.4 million, the annual interest payments on the new bonds will be roughly equivalent to the old ones, but the new issues could be redeemed at 50% of their face value up until Jan. 31, 1990.

Mum About Buyer

The company said the old securities will be subordinate to the new bonds, and it also noted that it has not obtained an independent opinion concerning the fairness of the exchange offers.

As of March 28, New World had about $33 million on hand in cash and marketable securities, and it expressed confidence that it has enough money to meet working capital requirements for 1988. “There can be no assurances, however, that the company can meet its cash needs thereafter,” the firm said in the circular to bondholders.

The company did not identify the buyer of Lions Gate, which is a post-production sound facility acquired by New World in May, 1986, for about $3.25 million. Nor would New World disclose the identity of a commercial lender from whom it said it borrowed $8 million to repurchase bonds with a face value of about $23 million.

New World said it has entered into a consulting arrangement with Michael Landon Productions that will entitle it to a percentage of revenue if “Highway to Heaven” makes more than $45 million in licensing fees to local television stations. The company said it has also begun talks with Landon about a new distribution agreement for the show,” indicating that other parties would be included.